Quantum Materials Corp. (fka QTMM)

[TedJ]

Missing the boat on the basics.

In order to change the number of authorized shares (A/S), a company needs shareholder approval.

In order to change the number of issued and outstanding shares, the company’s Board of Directors (BOD) can authorize a stock split (forward or reverse).

If a forward split will result in more shares than the authorized amount, then an increase in the A/S must be approved by the shareholders in order to allow the BOD authorized stock split to be implemented.

If a forward split will not result in more shares than the authorized amount, then the BOD authorized stock split can be implemented without shareholder approval.

A reverse split only impacts the number of issued and outstanding shares and cannot impact the Authorized Shares, it only increases the number of un-issued shares that can be issued in the future. The BOD does not need shareholder approval to authorize a reverse split.

If the BOD wants to maintain the current share structure, then the BOD can propose a reverse split combined with a corresponding decrease in the A/S to be approved by the shareholders. Technically, the BOD does not need to ask for shareholder approval of the reverse split, but it makes some shareholders happy.

So, the QMC proposal in the PRE 14A to allow shareholders to approve the implementation of the future reverse split (that preliminarily does not include a decrease in the A/S) is not actually required to be put before the shareholders. The BOD has the authority to simply wait and authorize a reverse split when they believe it is in the best interest of the company and the shareholders.

The reality is that the company could have simply waited four or five months and implement a reverse split without a corresponding decrease in the A/S. Management did not have to include the reverse split proposal in the Proxy for shareholder approval but I think that management may just be trying to share more of their business plan and the roadmap to the future, so their shareholders are better informed.

So the bottom line is that everyone here should already know that a reverse split does not require shareholder approval and can be implemented by the company at any time.